It’s gonna be a good year after all for Asia’s markets.
Robbie McDonnell, Trading Technologies’ executive vice president of global sales, who returned to Asia full time in recent months, said the region got a nice volume bump in November but the real growth is soon to come for a region that is implementing new technology, new partnerships and more ways to increase trading flows East to West.
Let’s start with the numbers, as 2016 was shaping up to be a down year for Asian derivatives markets. The Asia-Pacific group of exchanges as a whole were down 8.6 percent over the first nine months, according to FIA volume figures. Collectively, they handled 7 billion contracts, off from 7.66 billion for the same period in 2015.
November, however, was a game changer in Asia and certainly propelled markets around the globe. As a sampling, Singapore Exchange’s total derivatives trading rose 43 percent from a year earlier, with 16.6 million contracts traded in November. Japan Exchange Group posted a 32 percent jump in November, with 30.4 million futures contracts traded. ASX Group posted a 24 percent increase to 11.6 million contracts. Hong Kong Exchanges & Clearing reported that its total for the year (November was not immediately available), was up 10 percent in futures volumes through December 15.
McDonnell said it is not just one month that has created optimism, however. HKEX is looking to grow its business substantially, especially with the recently launched Hong Kong-Shenzhen Connect linkage, which he calls “a significant bridge between Hong Kong and mainland China.”
More Chinese brokers are opening offices in Hong Kong, which serves as a gateway to US and European markets. And it’s not just the short-term bump markets will get from HKEX’s connections, he said, but the longer-term growth over the next 20 years.
“Some of the firms have never had access to US and European markets before,” said McDonnell, who helped establish TT’s first Asian offices beginning in 2006 until 2014. “And in time, the flow will run the other way around.”
Meanwhile, Japan is also showing some signs of growth as well. Its markets have gotten serious about technology, launching a new Nasdaq-powered trading platform in July on its Osaka Exchange subsidiary and a new clearing platform deal with Cinnober. It’s a big step, as a fair amount of volume comes from the US and Europe into the exchange. Australia also has some solid prospects as well, especially as more than half of its open interest comes from outside the country. ASX is also trailblazing with its blockchain initiative. Meanwhile, Bombay Stock Exchange, or BSE, is set to launch the India International Exchange (INX) in January in India’s only international financial jurisdiction. Plus Singapore is home to a growing number of exchanges and exchange offices.
Collectively, McDonnell said Asia presents a ”unique opportunity.” Of course, TT is not the only firm looking at growth there, but the company has been positioning itself to expand across a number of countries in the coming months and years. If McDonnell’s assessment for developed and emerging markets is accurate, the region will provide opportunities across the board from software vendors to traders to exchanges.